This issue of Company Director arrives in the homes of our Victorian members with the state in a second wave of COVID-19.
This issue of Company Director arrives in the homes of our Victorian members with the state in a second wave of COVID-19. A major Australian city under curfew and much of its economy shuttered is an outcome we had hoped to avoid. Many have commented that this shutdown has been harder than the initial restrictions in March, striking as communities and businesses were getting back on their feet. This outbreak reminds us of the resilience of the virus, and the challenges we will face opening our borders to travellers within and beyond Australia.
The Commonwealth Treasury estimates that the Victorian restrictions will cost the Australian economy $10-12b in the September quarter. It also revised upwards its forecast for national unemployment from a peak of 9.25 per cent to 10 per cent, with the effective rate to climb above 13 per cent. While most of the blow will fall on Victoria — 80 per cent according to Treasury estimates — the effects will be felt across the country. Victoria makes up around a quarter of the Australian economy and has been a strong contributor to national prosperity, particularly over the past decade.
Victoria’s misfortune reminds us that there is no straight path to reopening. Governments, informed by data, will reimpose restrictions if there is evidence of community transmission. New South Wales, in particular, remains on a level of high alert.
Similarly, boards and organisations will exercise caution. Organisations providing essential services constantly confront a dilemma: an absolute priority to protect the health and wellbeing of their staff and the people they engage with during the day, against the demands for essential services. For office-based work, boards are shifting focus from the flexibility of “work from home” policies to the protections of “work from work” policies.
We must be vigilant to the demands these ways of working make on our staff and their mental health. The pace of change needed in March in the face of an immediate crisis may not work as well as we enter the second-leg of this marathon.
Many organisations will be stretched even further financially by the uncertain stop-start nature of recovery, especially as emergency support measures roll off. Modelling cannot assume a linear trajectory for recovery in revenues. Boards must prepare their organisations as best they can for a series of swings and downturns. We have seen consumer sentiment turning rapidly on the latest health news, leading to large fluctuations in consumer demand. The temporary relief for directors from personal liability for insolvent trading has been a vital measure to give boards the confidence to trade through the crisis. The AICD has called on government to extend the relief — due to expire on 25 September — until the end of the year, given the ongoing uncertainty.
Our not-for-profit (NFP) bodies, which were working in a very difficult environment before COVID-19, are facing particular challenges with reduced fundraising ability and, in many cases, an increasing demand for services. The patchwork of regulatory and governance arrangements across the federation also presents issues for NFPs, which are, for example, unable to access the same kinds of insolvency safe harbours as corporations. A regulatory approach that makes it easier for NFPs to weather this crisis must be a priority for governments at all levels. It is also a moment for directors of NFPs to reflect carefully on whether their organisation is sustainable. Particularly in a “for purpose” environment, it is confronting to ask whether to persevere or to merge with another purpose-aligned body in the best interests of their members and their communities.
Australia is still in a fortunate position. We have an excellent healthcare system, robust institutions, public trust in experts and a strong social safety net. We also have a director community that is resilient, resourceful and dedicated. Boards are working tirelessly and diligently to steward their organisations through this crisis. To provide the support you need AICD’s COVID-19 resources remain complimentary, and we continue to publish new resources to our website on a daily basis, and host new webinars weekly. We also recently launched the Company Directors Course Online, a new learning experience that balances flexibility, interactivity and structured online learning guided by leading practitioners and a learning support coach.
Two years ago, the AICD set out a new aspiration: “To strengthen society through world-class governance.” It was an important step to capture our purpose and it has never been more compelling. Sound governance practices and capable boards are vital to building a stronger society in the aftermath of this pandemic. As a national body, our state and regional diversity is a source of strength in our purpose. Today, we are thinking of our colleagues in Victoria.
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